Pros and Cons of Borrowing a Real Estate Bridge Loan

A lot of people wonder if they can borrow what’s called a real estate bridge loan and whether or not that would work for them. Before you borrow, it’s important to know the pros and cons of real estate bridge loans. 

The Pros of Bridge Loans 


Faster Turnaround - Usually the application process for a real estate bridge loan is a lot shorter than other types of loans 


Flexible - Getting approved for a bridge loan can give you funds to close on a new home without having to sell your current home. That means that if you find a home you love, or you find a great deal, then you won’t have to spend time selling the one you already own and can make offers quickly.


Less Hassle - Typically you can get a Bridge Loan can simplify the buying of a property.


The Cons of a Bridge Loan

Higher Rates - With flexibility and speed, come higher rates. Since Bridge Loans are for a shorter time period, the rates are higher to compensate the lenders for that. 


Origination Fees - Lenders or Brokers may typically charge an origination fee for Bridge Loans and this can sometimes be up to 3%. This is because of the speed and convenience of such a loan.


Equity Required - Usually, Bridge Loans use your current home as collateral for the new loan and so Lenders require you to have at least enough equity in your current home that equals the amount of Bridge Loan Principal Amount. 


Strong Finances - You must have a good credit score and cash to close and some liquidity to be able to Borrow a Real Estate Bridge Loan. 

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